Friday, December 21, 2007

What Is Really Going On With George Dickel No. 8?

Whiskey is weird.

How many other products can you name that take four or more years to manufacture? We always talk about this, how the whiskey aging cycle challenges distillery production planners. The story of George Dickel No. 8 Brand Tennessee Whisky demonstrates what can go wrong.

In the early 1990s, United Distillers was a company with big plans. The spirits division of Guinness & Co., it had been built by acquisitions over the previous decade. It was an international company with major brands in the scotch whiskey and American whiskey categories, as well as gin, rum, and others.

Among its assets was George Dickel Tennessee Whiskey.

One of the company’s big plans was to take selected American whiskey brands and give them a big marketing push in Europe and Asia, where American whiskey was starting to grow as a category, unlike the U.S. market, where it was doing nothing. One of the brands selected was George Dickel.

As a Tennessee whiskey, Dickel is a unique product. Unlike United’s many bourbons (at the time), the George Dickel recipe is shared by no other brands. Because of the whiskey aging cycle, any long-term sales growth strategy has to be accompanied by steady production growth, so that when the marketing plan succeeds, you have enough product to sell. United started to make more Dickel, a lot more.

The effort to sell more Dickel overseas wasn’t a failure exactly, but it didn’t meet expectations either. Part of the problem was that the newly huge company was unwieldy and often lacked focus. Dickel was too far back in the portfolio to get the attention it needed. Because the whiskey made at Dickel could only really be used for the Dickel brand, the stocks built up, and because nobody was paying close enough attention, they just kept producing.

In 1997, Guinness merged with Grand Metropolitan to form Diageo. To accomplish the combination, the company assumed a lot of debt. It soon had to start selling assets to generate cash and also cut costs wherever it could. It decided what its core business would be and, by 1999, it had decided that American whiskey was not part of that picture. Early that year, it sold off all of its American whiskey assets except two brands, I. W. Harper and George Dickel. It also stopped production at the Dickel distillery.

In addition to the excess whiskey inventory, Dickel had some environmental issues in Tennessee, having to do with wastewater disposal. They weren’t a huge deal but would require a significant investment to fix. Because of that, the company couldn’t casually crank up the distillery for a few weeks each season, just to keep some current production in the pipeline. They had to stay completely dark and take their chances.

When they stopped Dickel production, they pretty much stopped marketing it too. That will tell you what the underlying strength of a brand is. Maybe that was their plan, maybe there was no plan beyond stopping the bleeding and making the brand profitable again. With the distillery closed and the marketing budget at zero, it wasn’t too hard to make the brand profitable in the short term.

At that time, now almost nine years ago, product availability seemed like the least of their problems.

In 2002, Diageo began to pay some attention to Dickel again. The brand got a marketing budget and started to make some noise. Either the marketing worked, or it was just time, you never know exactly, but Dickel sales suddenly picked up here, there, and everywhere. They got their environmental problems fixed and resumed production in fall of 2003.

The new marketing program featured the premium Dickel expression, known as No. 12, but the less expensive No. 8 continued to be the main seller. In about the middle of 2007, Dickel No. 8 drinkers began to notice bare shelves. In some cases there was a note on the shelf explaining that No. 8 was in short supply because of the 1999-2003 distillery shutdown. Ads in a few markets explained that the shortage was being caused by the shutdown, combined with “an incredible surge in demand for George Dickel No. 8."

No company gets itself into a situation like that on purpose, but when you find yourself with that kind of problem you try to make the best of it. One tactic has been to generate publicity about the shortage itself. Nothing makes people want something like telling them they can’t have it. Another has been to release a temporary stop-gap, a new product called Cascade Hollow Recipe, aged three years. The strange thing is, the Cascade Hollow label looks almost exactly like the No. 8 label and it is being sold for the same price. It’s obvious that many shoppers, grabbing for the familiar black label, will never notice it’s a different product, a fact no doubt anticipated by the brand’s management.

Since the company could easily have made the Cascade Hollow packaging look completely different, why make it virtually indistinguishable from the No. 8? The strategy, it appears, is to have it both ways. They’re being upfront with the people who are paying attention while hoping to slip one past the people who aren’t.

Here are some simple facts the people at Diageo aren’t talking about.

No Dickel product except the new Cascade Hollow carries an age statement. It has one because it is required to, by law, because it is less than four years old. Unofficial statements by distillery personnel have pegged the top-of-the-line Dickel Barrel Select product as containing whiskey 8 to 12 years old, the No. 12 as 8 to 10 years old, and the No. 8 as 4 to 6, but those ages are all unofficial. They are trying to match a taste profile, of course, and if the whiskey starts to taste a little younger they hope no one will notice. Having no age statement gives them a lot of flexibility. With no age statement, all you know for sure is that the whiskey is at least four years old.

Regardless of what age it actually is, the oldest and most mature whiskey they have is going into the more profitable No. 12 and Barrel Select expressions. Those are reporting no shortages.

On Monday, the Associated Press (AP) ran a story in which a Diageo vice-president acknowledged the “temporary” shortage and promised that No. 8 will return early in 2008.

What seems underway, then, is an effort to turn a problem into an opportunity, always a good idea. By next year, Dickel hopes to be in greater demand than ever thanks to publicity generated by the shortage. The AP story alone was picked up by thousands of print and electronic outlets. When No. 8 returns, the company will have a new entry-level product on the shelves and its best-seller, the No. 8 Brand, will reappear, maybe at a higher and more profitable price. Then maybe they will start to change the two labels to give the two products more separation. They’ll transition price-sensitive shoppers to the Cascade Hollow product and get a little more scratch from No. 8 loyalists.

Let’s hope for their sake that all this works out better than their last master plan.

22 comments:

Hello, thanks for your report on Dickel. I live in Oregon and none of the local liquor stores have any Dickel of any kind. I like the No. 12 (no. 8 is too wimpy for my tastes), but can't find it. Is there a shortage for it, too? A marketing ploy? Any info you have would be much appreciated, as I really want to purchase Dickel again. I'd also welcome info on how to get No. 12 now. Thanks!

Wonderful work, Chuck. I've been searching throughout Michigan and Chicagoland for months, looking for #8 w/o success. We can also no longer find #12 or Select. I've started seeing small articles on their corporate decisions to shut down production, but yours is the most detailed analysis I've read. I'm going to link your post on my blog (TheFatty.com) for fellow fans.Great work and thanks for posting.

Dickel has shot themselves in the foot. They are pushing a 3 year old crap that looks like the old Black Label but it has a little "Cascade Hollow" logo on the label. Also I have seen some of the same crap with a red label recently. Wish they had stayed with the #8 and #12!!

Thank goodness the wife stopped in a local neighborhood liquor store the other day. She found 11 bottles of No.8 and bought them all. I've shopped all the major "chain" stores in Houston, TX and haven't been able to find any for months. I was down to my last bottle before she found these.

Can any on tell an Australia is there anything like Dickel in different brand I can buy. So far $ wasted. cant get it. but tried a vintage no 12 mini. every drop was rash-ended and was exactly the drink I have always wanted. . Here is stupid list. Note. Dislike big dry oaky heavy char bourbons so far. like oily buttery silky corn. Puppy winkel 10,12,15Bufflio TraceWild Bread Wild Turkey. Laguvin 16Glen Ord 12yo Oban 14yo,sherried Tyrconnell,I ordered the last no 12 from uk. I was not that impressed. I first came aware of Dickel in the Chevy Chase Film Funny farm in 1988. I am a memeber of whiskyx3 as user id chewleathertobacco.

I was a big fan of #8. After not being able to find it anywhere, I finally bought Cascade Hollow in 2008. It was horrible! Still can't find #8 anywhere here in Detroit. I gave up drinking whiskey altogether because nothing was as good. If I find it, I will buy it, but if it doesn't taste the same, I'll never buy it again.

I have recently discovered 10 bottlels sealed and unopened of cascade whisky from my aunt and uncles wedding from 1956, labled 6yrs. aged which would make them 61 yrs old, In fact I am actually drinking one right now, very smoothe

to ANONYMOUS: Intesting find. I'm a new collector of DICKEL stuff mainly from me being a native of Tullahoma TN - home of Geo Dickel. I think you should at least save the empties, should you choose to kill them ... they're worth something to us collectors. If interested, contact me at pm in tn at gmail.com. Thanks - Paul

The Stewed Cow in Hoboken, NJ is having a Dickel Event this upcoming Wednesday... We're going to be giving free tastings of Dickel 8, 12, Rye, and Barrel Select! Also Peter O'Connor from 'Bar Rescue' will be here... He is the Whiskey Master for Diageo. Wish all you whiskey/ Dickel Lovers would come! Also I'm excited to talk to Peter about this article. So informative!!!! Thank you!